Trends

What does the future of online grocery marketplaces look like?

Sorana Gheorghiade
Sorana Gheorghiade August 16, 2021
What does the future of online grocery marketplaces look like?

According to a grocery analytics survey done in the US, 36% of US consumers who started shopping for groceries online during the pandemic expect to keep this habit after the pandemic is over. This is one of the reasons why digitally enabling stores has been the number one priority of most retailers in the past year, irrespective of their business tier, segment and size. 

In April 2021, VTEX organized a roundtable discussion focused on the future of grocery marketplaces and online shopping in this segment, aiming to gather insights, findings and informed opinions on the future of online grocery businesses and marketplaces. The main participants to the discussion were Ben Hussey, Digital Commerce Evangelist for VTEX and Kevin Coupe, host of the Morning News Beat, followed by ecommerce experts and analysts. Let’s take a look at what was discussed!

The current grocery industry scenario 

Grocers who have already taken their businesses to the digital world, for the most part, are working on perfecting their tools and installing the most efficient revenue-boosting solution – they’ve been working hard over this past year to evolve both their technology and their teams to support this very ambitious digitalization endeavour. 

As you can see in the chart above, the online shopping revenue for food and drinks has exceeded all expectations, with significant increases. Take a look at the difference between the old and revised forecast for the US grocery market: while these numbers indeed show positive feedback from the digitalization of grocery shopping, roughly 40% of the sample size are still going to be shopping physically for groceries. Why is that? 

Since the beginning of 2020, many changes have been happening in the grocery industry. For example, retailers (and not only) have equipped their businesses with ultra-fast grocery delivery in urban areas and the average consumer switched from physical shopping to online shopping. 

What is more, people are shopping across brands more than ever and grocers are heavily investing in everything digital from Live Shopping functionalities to automated micro fulfilment centres. In the online realm, customers have developed an affinity not only for products and brands but for the user experience that is more friendly and makes one’s path to purchase easier. 

Nonetheless, the same industry that has seen so much growth and investment in less than four full quarters is battling with imminent digital challenges. Grocers are now faced with the necessity of making strategic decisions to capture market share by retaining the customers accumulated during the COVID-19 period. They also have to meet the rising consumer expectations for interaction and convenience while finding operational efficiencies to gain and retain margin. On top of that, other tactical questions arise for the business owners, such as how to monetize the new digital traffic, how to balance predictable and fast delivery and most importantly, how can one make a business stand out? Some of the answers to those questions, discussed on the roundtable, are below. 

Grocery Digital Best-Practices

As ecommerce grocery orders surge, online grocers must cultivate lifetime value and loyalty from new customers to keep them close. Convenience is a primary reason why customers shop for groceries online. Therefore, the future success of online grocery hinges on acquiring and retaining these customers with a frictionless and engaging digital experience that also follows their needs of a friendly UX. As a retailer, you can see what people look for on your website and estimate the demand for certain products. You can then use that to determine what new products you should sell on your marketplace. A key advantage is that, by looking at these metrics, you can understand what is driving your customers there and take care of their experience from that point on, guaranteeing it is always the best one. 

However, there are always higher risks on one end of the spectrum. In this case, the supply chain risk is all on the grocer because, while it might not matter for the individual whether they walk to the store or order the same purchase on the website, it matters for the grocer whether they invested more in the online marketplace than the physical one and the customer decides not to shop online. 

So take that as a grocer and put that into your space, and how you might use those types of examples. One way to think about solving this issue is anticipating the choice that a retailer makes: to what degree is that dependent on pure strategy, as opposed to the size of revenue and the size and number of physical stores? If you’re a business owner, think about that. 

Always start with the why

Irrespective of how big your business is, try to think of it as a small retailer. If you’re a larger retailer that has a very specific brand, maybe around organic or fresh products, then you’re probably not going to extend your aisle into health and beauty. But you might want local suppliers to be part of the marketplace and add to your network someone who can give the customers the farmers-market experience, or something unique like that. 

Here’s the why: the smaller the business is, the more important becomes every single decision you make regarding the catalog. Think about your digital marketplace as if it was a very small one. The risks of doubling your rewards are just as high as losing half of what you’ve built. But when the risks are high, you automatically assess every detail of your decision. 

Collaborative… everything!

It’s an art in blending stores, suppliers, partners and customers into the same ecosystem. It’s called collaborative commerce and it does wanders. Whether you sell to consumers or other businesses, you need a commerce platform that embraces digital collaboration to fuel growth, power innovation, and build relationships online. Organizations launch their own marketplaces through collaboration, making a puzzle of all their best resources. This way you can test new products, explore new markets and attract new customers by leaning on third-party suppliers and drop-ship partnerships for inventory and fulfilment. Or gain customer insights on pain points and preferences and adapt your business strategy to meet and exceed their needs. 

All in all, trends change and predictions do not always reflect what will actually happen later today, tomorrow or in ten years from now. To build your future-proof grocery online marketplace, a key piece of advice from the discussions during the roundtable event is to redirect your revenue and reinvest in the initiatives that you need to do to differentiate yourself.

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